The seasonally adjusted national unemployment rate fell to 3.4 per cent in October — according to the latest Labour Force data from the Australian Bureau of Statistics (ABS) — down from 3.5 per cent.
The number of employed Australians increased from 13.58 million to 13.61 million, while the labour participation rate remained stable at 66.5 per cent.
The improvement has surprised markets, which had expected the unemployment rate to remain stable for the third consecutive month.
This follows the release of the Wage Price Index (WPI), which also surpassed expectations.
Wages grew 1 per cent over the third quarter of 2022 (Q3), up from 0.8 per cent in the previous quarter and exceeding market expectations of a 0.9 per cent increase.
The WPI rose 3.1 per cent in the 12 months to Q3, up from 2.6 per cent as of 30 June, and above the forecasted annual rise of 3 per cent.
Reflecting on the latest labour data, ASPL Group CEO Kris Grant said tightness in the job market would only place further upward pressure on wages, which could rise to 5 per cent in 2023.
“Employees switching jobs are negotiating higher rates of pay and this trend of greater bargaining power to workers and stronger wages growth is set to increase next year with an even tighter labour market,” she said.
According to an analysis from Barclays, the higher-than-expected increase in jobs suggests “spare capacity still exists”, despite an additional 305,000 jobs added in the 10 months of the 2022 calendar year.
ANZ Research is expecting the “solid” wages and jobs data to increase the likelihood of a 25 basis point (bp) hike to the cash rate in December from the Reserve Bank of Australia (RBA).
However, Robert Carnell, regional head of research, Asia Pacific at ING Economics, does not expect the improvement in labour conditions to have “any material bearing” on the RBA’s monetary policy strategy over the medium term.
“We still anticipate further tightening and at a moderate 25 bps per meeting pace now that rates are already at 2.85 per cent, with the RBA signalling that they can take a more measured approach from here on,” he said.
Ultimately, he added, rates would rise into the early part of 2023, with the cash rate target tipped to peak at 3.6 per cent in 1Q23 amid signs of “inflation topping out and growth beginning to slow”.
